Good afternoon, everyone, and welcome to Q1 FY 2027 earnings conference call of Emcure Pharmaceuticals. We'll begin today's session with opening remarks from the management, followed by a Q&A session. Joining me today on this call are Mr. Satish Mehta, Managing Director and Chief Executive Officer; Mr. Taj Shaikh, Chief Financial Officer; Mr. Samit Mehta, Whole Time Director and Chief Operating Officer; Mr. Vik Thapar, President, Corporate Development, Strategy, and Finance; and Mr. Piyush Nahar, Executive Vice President, Corporate Development and Strategy. We hope you had an opportunity to review the financial results, the results presentation, and the press release, which was released earlier this afternoon. Before we start, please note that this call is being recorded. I also need to remind everyone about the Safe Harbor related to today's call. Certain statements made during this call may be forward-looking in nature.
These statements are based on our current expectation, assumptions, and management's views as of today. Actual results may differ materially due to a range of factors, including market conditions, regulatory developments, competitive dynamics, operational factors, and other risks and uncertainties. The detailed disclaimer accompanying the results presentation and the press release applies to this earnings call. I will now hand over the call to Mr. Mehta to begin his opening remarks. Over to you, sir.
Thank you, Saurabh. Good afternoon to all of you. This is Satish Mehta, Chief Executive Officer of Emcure, and I am absolutely pleased to speak to you, post-publication of our Q1 results, which I believe you must have seen by this time. Before I start talking about the performance for the quarter which has ended, I would like to share some important board and organizational updates. Some important details I would like to share with all of you. Number one, our Chairman, Mr. Berjis Desai, and as far as Berjis is concerned, he's associated with me for more than three decades, has been appointed as member of National Commission for Minorities. Member of National Commission for Minorities, he has been appointed. It's a full-time employment of Government of India. As a result of this particular appointment, Berjis is going to step down.
Berjis Desai is going to step down from the boards of all listed companies. Obviously, as far as Berjis Desai is concerned, he will retire from the board of directors of Emcure at the conclusion of our AGM, annual general meeting. As I told some time back, Berjis and myself, we have been working together for more than 35 years, and he has been very much responsible in shaping the value system and culture of the organization, and immense guidance and contribution he has given to Emcure. Obviously, being a stalwart and a very eminent lawyer in his own right, he has helped in terms of improving the governance standards and institutional processes of the company. We'll obviously continue whatever years we have jointly built over a period of last 35 years and take it to the next level.
Anyway, the entire management of Emcure and each and every Emcurean is absolutely grateful to Berjis for the contribution that he has given to company in last 35 years, and things wouldn't have happened but for his active participation. With the recommendation of the board, I will now take on the role of Chairman in addition. Satish Mehta will take on the role of Chairman in addition to my existing role as Managing Director and Chief Executive Officer of the company, post the conclusion of the coming Annual General Meeting. In a weird way, I feel happy about the development because I jokingly keep on saying that I started my journey in early 1980s, and I still vividly remember the first year turnover of the company was less than INR 10 lakhs.
At that time also, I was Managing Director and CEO, now I've got promotion after 40 years, more than four decades of services to the organization. Now I'm the Chairman and CEO of the company because of the support that I've received from you all. I assure all of you that company strategy, operations, execution, everything remains absolutely unchanged. In terms of this new position that has been entrusted to me, I feel humbled, and I'm committed to give more than what I've done so far, and I will work very closely with the board, senior management team, and each and every Emcurean to take the company to the next level. The first thing I told you about Berjis stepping down from the board of the company after having been appointed as member of the Minority Commission.
The second important announcement I would like to make is that Samit Mehta now takes over as Chief Operating Officer of Emcure. As COO of Emcure. As far as Samit is concerned, as you all know, as I told you in the beginning, he's extremely passionate about science and technology. He has done his MBA from Wharton, and he has spent more than two decades with the organization. He has also been involved in giving a lot of innovative products and has worked very closely with the R&D and manufacturing. Now, going forward, he will have a broader oversight of group R&D operations licensing activities.
I have every reason to believe that Samit will play a bigger role, not necessarily in the areas where he's directly involved, but overall strategic input we will get from Samit as he's getting committed to the next generational leadership change that will happen in the organization. That's a very important development that has taken place, that Samit is going to become the COO. He will get more and more involved in the management of the company, and clear signal to everyone about the way forward. The third important thing that has happened, that we have just recently acquired 12% minority stake in Gennova. Now Gennova happens to be completely owned, 100% owned subsidiary of Emcure. With this strategic platform, the strategic control of our biological platform will obviously ensure that we have a very sharpened focus on biosimilars and, obviously, adjacent therapeutic platform.
The another thing that we have done, and biosimilars is very close to my heart. In fact, we began the journey 15, 16 years back. There, as far as Samit is concerned, because of his passion for science and technology, apart from being Chief Operating Officer of Emcure, he also becomes Chief Executive Officer of Gennova, our biotech arm, fully owned 100% subsidiary. He will obviously be focusing on taking Gennova biosimilars and other technologies to the next level. I personally believe the way that things are happening at the global level, a lot of things are happening in the field of biologics, and obviously Samit's leadership to Gennova will ensure that we will have a robust product pipeline going forward because biosimilars and biologics are going to play a very important role.
The Gennova consolidation now allows us full control over India and foreign subsidiaries because all subsidiaries, Gennova, Zuventus, now everything is 100% owned by the parent company, giving us a very simplified and aligned group structure that ensures strategic coordination across all businesses. I talked to about three major events. Berjis stepping down, I am assuming the role of Chairman of the company. The second thing I talked about, Samit becoming COO of Emcure. Very clear signal about way forward. The third thing I talked is obviously about Gennova minority stake being acquired, 12.06. Each and every company under the Emcure umbrella is 100% owned by parent company. Having discussed about these three major events, now let me focus on our quarterly performance, which I believe most of you have seen.
As far as our FY 2027 first quarter is concerned, it's the second year of our five year plan, I am very pleased to say that we have started on a very strong footing, and Q1 gives a very encouraging early signal. The Q1 FY 2027 reflected strong all-around performance with broad-based growth across revenue, profitability, and earnings. Let me tell you what has happened. As far as revenue for the quarter is concerned, it grew by 22.8% year-on-year to INR 2,580 crore. INR 2,580 crore, I repeat. Supported by momentum across geographies. As far as EBITDA is concerned, it has grown by 25.8% to INR 508 crore, margin has improved to 19.7 percentile points, 50 basis points more, reflecting the productivity gains and operating leverage that has happened in this particular quarter.
As far as PAT is concerned, profit after tax has grown faster at 36.2% to INR 292 crore, INR 292 crore, underlining the strength of quarter's operating performance. Enormous amount of excess control has been exercised in operating parameters and operating performance. Again, outstanding performance as far as the second year of the five year strategic plan about which I talked last time. We have obviously begun on very sound footing. With that, let me turn to the performance of what has happened in India. As far as India business is concerned on year-on-year basis, it has grown by 10.2%. We have done INR 1,095 crore, returning to double-digit growth over the quarter previous year, Q1 of previous year. If you compare with Q4 of 2026, I repeat, we have grown by 12%.
As far as the performance is concerned, it is in line with our plan and line with our expectations. I must say that all our leading brands in CNS, cardiology, and gynecology have shown very good traction, very good growth. We have also seen improvement in Zuventus following the changes which have taken in the previous quarter. In the previous quarter, as I told you last time, there was a bit of problem in Zuventus, but now we are moving towards stability. What really happens, there are three areas on which we have been working, stability, consolidation, acceleration. Stability we have achieved. We are almost in the process of completing consolidation, and now we are obviously moving towards acceleration going forward, having achieved the first two objectives that we have set for ourselves.
As far as the in-license products from Sanofi, Roche, along with Poviztra from Novo Nordisk, the semaglutide from Novo Nordisk, the performance complemented the performance of our own brands and broadened our presence in relevant therapy areas. It's a matter of happiness that through Poviztra, we have a very solid presence in obesity market, which I believe is going to grow going forward. I'm also happy to inform that we have entered into consumer business through our wholly-owned subsidiary, Emcure Wellness, and that is also getting traction. In fact, one of the products, Bitter Drops, that we have is showing early signs of scalable growth going forward. It has been very well received by the consumer. It is showing good traction going forward and I'll keep on telling you quarter-on-quarter about the performance of Bitter Drops as we go forward.
We remain confident of continual growth in India as we strengthen sales teams and portfolio gain traction. I feel going forward, whether it is Q2, Q3, Q4, we will see the northward movements as far as the Indian business is concerned. As I told you last time, as far as Indian business is concerned, there is a lot of what I would say overseeing of the performance from senior management, I include it. Obviously this particular part of the business is very close to our heart, and you will see positive movement quarter after quarter as far as India business is concerned. As I told you some time back, I think the process of consolidation is behind us, and now we will obviously move towards acceleration. Having said that, now let me turn my attention to international market.
As far as the international business is concerned, it delivered a very, very strong and robust growth as far as the quarter is concerned. With revenue of INR 1,485 crore recording a growth of 34.2%. Growth was supported by base business ramp-up, new launches and obviously, we had tailwinds because of currency. All regions contributed to this strong performance. Just to recap, as far as Europe is concerned, Europe grew by 32.8% to INR 537 crore, with growth led by a strong base business performance and obviously enhanced contribution from liposomal amphotericin B. As far as Canada is concerned, Canada grew in the first quarter by 24.6% to INR 427 CR with continued growth in the base business. While rest of the world grew by 44.8% to INR 522 crore, led by very strong performance in ARV HIV business.
Having spoken about stellar performance of international market and also getting back on the growth, the track, as far as the domestic business is concerned, let me spend a few moments on the R&D and the pipeline that we have. During the quarter which ended, we received 15+ product approvals across developed and emerging markets. We received 15 product approvals. These approvals provide visibility for continued business growth for Emcure across market because as far as the international markets are concerned, the growth is driven by the quality of filing that we have, what type of products that we file, and how many approvals we get. That plays a very important role, and it's a matter of happiness to inform my investors that we got 15 approvals in the quarter that has just ended.
As we discussed previously, we continue to build differentiated capabilities across biologics, complex injectables, novel delivery system, especially focus on liposomal platform where we have a reasonably good understanding. I think, we are going to focus on the technology-driven differentiated products. That is going to be the core strategy that we'll be pursuing as far as the emerging markets and Europe and Canada is concerned. Again, something interesting has happened, as in the month of July, as part of government technology transfer, government-led technology transfer, ICMR licensed a novel anti-HPV candidate, a novel HPV candidate for cervical neoplasia to Emcure. This particular product will have to go through various phases and we are very excited because this is NCE and the development is also a part of our women healthcare portfolio. As you know, that is the woman healthcare portfolio.
Gynecology is one segment where we are doing well, and this is part of that particular segment. Again, as far as July is concerned, we signed a royalty-free, non-exclusive voluntary licensing agreement with Merck Sharp & Dohme to make and sell a generic version of experimental once a monthly Oral HIV pill in 129 low and lower middle-class income countries. The drug, alimatravir, a pre-exposure prophylaxis or PrEP candidate, is currently in late-stage development. As I told you, we do exceedingly well as far as the ARV segment is concerned. Last time, we spoke about lenacapavir, the molecule which has been licensed by Gilead, and this is one more feather in our cap getting, MSD product which is also a path-breaking molecule, oral pill once a month. Obviously, as we go along, as far as ARV portfolio is concerned, that also we are consolidating.
That's what is going on. In conclusion, I would like to tell that as far as FY 2027 is concerned, strong start to the second year of our five-year journey. We delivered broad-based growth, saw improvement in India over Q4 of FY 2026, consolidation as far as Zuventus is concerned. We have continued with our strong international momentum, acquired full ownership of Gennova, and deepened our leadership bench. As far as we are concerned, our priorities are absolutely well-defined. The emphasis going forward will be on execution, execution. That is key to success. I believe very strongly on that. Second thing, acceleration and improvement as far as the Indian domestic market is concerned. We'll keep on doubling down on the international business where scale is also going to play an important role, where getting technology-driven differentiated products is going to play an important role.
We keep on focusing on that. We also will work to advance a differentiated pipeline and convert growth into operating leverage. If you recollect, last time, I had very specifically mentioned that we as a company, as far as the strategy is concerned, will double down on whatever we are doing, make the big brands bigger. That's one thing. The second thing, we will also ensure, I'm very proud of the R&D that we have built up. We'll keep on getting products from our R&D. Even today when I'm speaking to you, all the products which have come from our R&D, like ferrous ascorbate, Orofer XT or Orofer FCM or Pause, or for that matter all chiral compounds, they are doing exceedingly well. Do expect R&D to contribute to the growth of the company, make big brands bigger.
The third obviously important vertical that we'll have as part of the strategy is to work on in-licensing from multinationals. Also look out for products from ICMR and look out for products which are in early stage of development. That's the strategy we'll follow. I am very happy to say that Emcure has shown a lot of resilience. That is something which has happened. If you look at the global environment, what's happening in West Asia, Middle East, or even for that matter, what's happening with Russia and Ukraine, and with so much of uncertainty, Emcure has shown a lot of resilience and everyone is absolutely committed to the growth of the company.
That is something which makes me feel happy as I also take the role of chairman, with the support of each and every Emcurean backing me and obviously support of all the investors, which means a lot to me, and that's what we are doing. I think with the very diversified and geographic presence in various geographies with four verticals that I had talked to you, I think, going forward, the performance is going to be northwards, is going to improve quarter-over-quarter. All of us at Emcure, we are very positive about the direction that company is taking. Obviously we'll be counting on your support as we go forward. Okay. With that, I will complete my opening remarks.
Just I would like to reiterate my confidence in Emcure to deliver low to mid-teen revenue growth in FY 2027. As I told you, quarter after quarter, there will be northward moments, positive moment. As we discussed in the past, we are committed to give 70 basis points - 100 basis points of EBITDA margin expansion. Very bullish about the business. With that, I will request my Chief Financial Officer, Taj, to give a little more color on and run through the financials before we open the question and answer.
Good afternoon, everyone. I will now walk you through our financial performance for Q1 FY 2027. Unless stated otherwise, all growth numbers in my remarks are on a year-over-year basis. Revenue from operations grew 22.8% to INR 2,580 crores, reflecting strong execution across both domestic and international businesses. Growth was broad-based, with international markets continuing to be the bigger growth driver, while the domestic business delivered a resilient performance. Domestic revenue grew 10.2% to INR 1,095 crores, led by strong performance across key therapies including CNS, cardiology and women's health franchise. International business grew 34.2% to INR 1,485 crores, continuing to be a key growth engine for the company. Europe grew 32.8%, supported by amphotericin scale-up and steady execution in the base business. Canada grew 24.6%, led by new launches and market share gains.
Emerging markets rest of the world delivered strong growth of 44.8%, supported by robust growth in the ARV segment and continued momentum in the non-ARV segment. Gross profit stood at INR 1,507 crores, up 16.1%. Gross margin was 58.4%. Margins declined year-over-year, led by increased exports and also a function of product and business mix. R&D investments were INR 90 crores, representing 3.5% of revenue. R&D investments are expected to pick up in the remainder of the fiscal year to support our full-year plans. EBITDA grew 25.8% to INR 508 crores, reflecting the benefits of scale, operating leverage, and continued productivity initiatives. EBITDA margins improved to 19.7%, up 50 basis points, supported by operating efficiencies and disciplined cost management. Depreciation and amortization grew to INR 110 crores from INR 99 crores in Q1 of FY 2026, and [inaudible] was INR 32 crores. Effective tax rate for the quarter stood at 25.6%.
Profit after tax grew 35.4% to INR 292 crores with PAT margin improving 110 basis points. This reflects strong operating performance and improved profitability. Gross debt as on 30th June stood at INR 1,291 crores with cash and cash equivalents at INR 189 crores. Net debt stood at INR 1,103 crores. Net debt is expected to increase in the next quarter, reflecting the Mantra and Gennova payouts completed in July. We remain focused on sustaining growth across our domestic and international businesses, improving operating efficiencies, and driving steady margin expansion over the medium period. I will open the floor for questions.
Thank you. We will now begin the question and answer session. To ask a question, please click on the Raise Hand tab. When the operator announces your name, please accept the prompt on your screen to unmute your microphone, and then proceed with your question after introducing yourself and your company name. Our first question comes from Kunal Randeria. Please accept the prompt on your screen to unmute your audio and go ahead with your question after introducing yourself.
Hi, Kunal Randeria here from Axis Capital. Good afternoon, sir. Sir, first here on the India business, good to see that the growth has touched double digits as you guided in the last quarter. Is this a clean growth? Is there any element of channel filling over here after Q4, or is this how the growth should be going forward also?
There is no channel filling in this, Kunal. This is a normalized growth that we have. I think as the CEO mentioned, we expect growth to improve further from these levels that we have seen in the coming quarters.
Right. This improvement in growth could be I know CEO sir said a few things about your existing brands, your therapies are doing well. How much of your revenue contribution would be coming from some of these in-licensed products? Are they growing in line with the company average or below that or above that? Some color would be helpful.
I think most of the in-license are growing in line with the industry. I think that's what we talked about even when we taken over the portfolio, they will continue growing in line with the industry growth. Where we're talking about faster industry growth, that will be driven more by our own brands across women's health, cardio, CNS, oncology, those segments.
Right. Got it. Second question is on the ROW business. You are coming off a very high base of last year where you had a 42% growth. Now you have 45% growth driven by the ARV business. What would be the ARV contribution, and would that mean that FY 2027 base would be high and then FY 2028 could be a bit subdued?
No, I think we are seeing growth in both our ARV and non-ARV segments. I don't think we're looking at FY 2027 will be abnormally high, then it flattens out. Yeah, ARV is higher in the current quarter. I think about 65%, 2/3 of the business in ROW will be ARV in this quarter. For the full year, we do expect we end up at about that 50%-55%.
Sure. Got it. Just one more if I can. I guess the gross margin decline has been lower to the geographic mix of the business. Is there any lever for gross margin expansion beyond the geographic mix changing?
I think broadly it is due to the geographic mix. We obviously continue to look for ways and means to improve some of the activities around procurement or COGS improvements. That should continue as an ongoing basis. By and large, I think we had been guiding historically to about a 60%+ gross margin. Given the strength we're seeing where we're outperforming on the international piece of the business, I think where the gross margin is coming in at or somewhere in that ballpark, 59% or 59%-60%, is what one would assume if we continue to see this trend of the international business outperforming.
Perfect. Thanks, Vik. Thanks, Piyush. All the best and congratulations to Samit. Thank you.
Thank you. Participants, to ask a question, you may click on the Raise Hand tab. Ladies and gentlemen, if you wish to ask a question, you may click on the Raise Hand tab. Our next question is from Alankar Garude. Please accept the prompt, unmute your microphone and go ahead.
Hi. Good afternoon, everyone, thank you for the opportunity. Satish , you spoke about domestic growth picking up here on. Just trying to understand where are we in the Zuventus restructuring journey. Maybe in some sense, if you can quantify it, maybe we are 60% there, 70% there. Some sense on that would be useful.
As you said, I have a very interesting statement, which I am sure, Alankar, you got it. There are three phases. First, as I told you about stability, consolidation, acceleration. These are the three very specific terms I used. As I told you, in the last quarter, we had a problem. We had Exodus as far as Zuventus is concerned. Now the stability has come back, normalization has taken place. Consolidation has also happened, now we are moving towards acceleration. As far as Zuventus is concerned, I think most of the job has been done and we are moving in the right direction. Zuventus is no more my worry, it's only a question of putting it on high growth. That's the basic objective with which we are working. We have a very good team in place.
All new people, they are also fairly well-trained going forward, you should see good traction as far as Zuventus is concerned.
Sure. Got it. Maybe a follow-up there will be if we look at the IPM growth, it's clearly picked up over the last two, three quarters. In context of that, Emcure's domestic growth, because of the challenges we've seen on the Zuventus front, has been lower. Would you like to call out when exactly would the company be back to growing at par with the market?
Alankar, I think from next quarter onwards you will start seeing that. If you look at even last year, 2H, we had seen a bit of impact and slowdown out. That base effect will also start playing out from 2H this year. I think from second quarter onwards you will start seeing us more in line with the industry and then second half will be more faster than industry growth.
Second half, Alankar, will be much better. As far as this quarter is concerned, we think we should be in line with the industry growth. Again, as far as Q4 is concerned, if you compare Q1 over Q4, we have grown by 12.2% or 12.3%. It's all moving in the right direction.
Got it. The second question is again on domestic growth. If we strip off the Sanofi diabetes portfolio, if we strip off Roche Nephrology and Poviztra, would you like to give some range as to where the domestic growth was in the first quarter?
I think if I strip out the Sanofi OAD and the Roche, we'll probably be about 6%-7% growth in the quarter.
Got it.
Poviztra effectively is a new brand that we are launching out.
Got it. Basically when you talk about growing at par or maybe outperforming the market, you are looking at it at an aggregate level. You are not just looking at the organic growth.
Next quarter onwards, if you look at it, OAD will be in the base. Roche is a much smaller business, so it doesn't move the needle much.
Got it. The final question before I come back in the queue, maybe Satishbhai to you is, if you look at the traction in semaglutide Poviztra, not just specifically on Poviztra, but in general for the market, we have seen quite interesting trends over the last few months. Maybe some media articles say that the pickup has been slightly slower. There is inventory in the channel. There are companies who say that more or less the traction has been in sync with expectations. What is your view as far as the pickup is concerned, and how should we expect the market to evolve maybe over the next three to six months?
I don't have a crystal ball, my dear, because as far as we are concerned, we are marketing innovation. What has really happened, that apart from marketing Poviztra quite aggressively, one good thing that has happened from our point of view that last absolutely 15 days back, Poviztra was cleared, or semaglutide or innovator was cleared for MASH. That's one area where we see the growth, and that's one area where we will possibly have a pole position. To really opine what's happening in that particular market, the jury is out. Wait for three to six months before we know what's really going on, because I am given to understand almost 40, 50 brands are being launched. How much is channel stuffing and how much is real, what I would say, consumption, I wouldn't be able to hazard a guess.
I can only talk about what's happening at our level, I can only say one thing, as far as Poviztra is concerned, month-over-month, we are growing.
If you can comment on the acceptance levels, both amongst physicians as well as patients, any instances which you can highlight which give you confidence that things will pick up going forward?
No, because what happens as far as the innovator is concerned, that is our DNA molecule, number one. Second thing, this part of the public domain, the two major Indian players, they had a recall. Third thing, as far as this particular product is concerned, being biologic, I think what really happens, the absorption or even for that matter, the solubility is also a very major challenge. Since the innovator, Novo Nordisk, and of course Emcure, we took a decision to make the pricing very competitive. I have every reason to believe that eventually we will emerge a winner or will do better than most of the brands. Because first of all, the innovation. Second thing, massive data that we have, more and more publication of clinical trials which is happening because of the association with the innovator.
Things will work out very well because the generics got launched only sometime in the month of March, there is a lot of noise, a lot of brands. Let's see how it plays out. It's a question of survival of the fittest, and that's what will happen over a period of time. Where I feel we did a very smart thing by getting associated with the innovator.
Thank you. Ladies and gentlemen, to ask a question, you may click on the Raise Hand tab. Our next question comes from Alok Dalal. Please accept the prompt on your screen and unmute your microphone to proceed with your question.
Good afternoon, thank you for taking my questions. On the export side, what is the constant currency growth for the quarter?
I think for the overall company level, the Forex impact was about 6% odd, 6%-7%. On the international, it would have been about 12% odd.
Okay. Thank you. For growth in Europe and Canada over the coming years, will it be more broad-based growth or will it be driven by one, two big product opportunities like AMFO, for example?
I think there will continue to be big hitters that will contribute and continue to gain momentum, whether it's AMFO or some of the other filings that we are expecting approval for shortly. That said, we have a portfolio approach depending on the market. Say, for example, in U.K. we also have a retail presence, there's a large number of your plain vanilla generics as well, which contribute meaningfully. I think that mix will continue to happen. Of course, one or two big products will contribute more than some of the others.
I think it's a little bit different for the two geographies. If you look at Europe, multiple countries, I think it's going to be a little bit more concentrated in terms of some of the high-profile pipeline products that we're working on. For Canada, however, single market, I think that's a fairly broad-based growth. There's no sort of big hitter product as such driving concentration in that market.
Thank you, Vik. Is AMFO now introduced in all countries of Europe, or is it just a few ones today?
It's pretty much in all the countries. There also, we are ramping up supplies, the order book across the different countries should also go up in line with the supplies.
I think, Alok, what's happened is we have introduced the product, again, most of them are tender-based, they'll have their procurement cycles.
Right. It should pick up in the coming quarters is what you're trying to suggest.
Yeah.
Last question is on semaglutide for Canada. I saw in the presentation there is a filing lined up for it. What could be the timeline that we are looking at?
I think we will be filing in the current quarter, in the next few months.
In this quarter?
Yeah.
Next few months. Okay. Piyush, you will be in the second wave.
Yes.
Do you still feel there is upside once you are able to get approval and launch the product?
I think it will be a decent product. As we said, Canada, we're not banking on one product which will be a meaningful growth driver. It will be one of the portfolio products that we have.
Okay. Since the product, it was known that it was going to go off patent, and company has a relatively stronger positioning in Canada versus others. What could be the reason why you are in the second wave as compared to first wave?
Yeah. We were looking at semaglutide as a global development. It was tagging along, whether it is Canada or some of the emerging markets with our domestic development, and then with whatever discussions were ongoing, there was some delay in terms of looking at expanding that or progressing that, and that's why most of these other markets, which also had patent expiry, it's going to be more a second wave filing than in March when it expired.
All right. Okay. Thank you for taking my questions.
Alok, before we proceed, may I request you to please announce your company name as well?
I'm from Jefferies India Private Limited.
Thank you. Our next question comes from Tushar Manudhane. Please accept the prompt on your screen, unmute your audio, and proceed with your question after announcing your company name as well.
Yeah. Myself, Tushar from Motilal Oswal Financial Services. Firstly, on gross margin, while there has been currency benefit as well, what has led to probably lower of the gross margin both year-over-year as well as quarter-over-quarter basis? Not sure if you have already covered this in your comment.
Tushar, I think it's largely driven by the business and product mix, right? With Europe and ARV being higher, that leads to a slightly lower GM. Effectively, I think how we had always talked about in international markets, there are certain businesses where it's more B2B model, where probably GM is lower, but at EBITDA level they are more accretive.
Okay. As this sort of Europe business scales up or even the Canada business scales up with Quebec, where do you see this gross margin sort of settling, maybe FY 2027, [inaudible]
I think 2027 will probably be around the 59%.
Yeah, I think if I can just add a little bit of color here. I think at the start of the year, our overall guidance was that overall top-line would be growing somewhere in the low-to-mid teens, and we expect a gross margin profile of the entire business to be somewhere in the 60% or 60%-61% sort of frame. Given our strength of performance in Q1 and visibility we have particularly on some of the order book on the ARV segment, et cetera, we think that in terms of the overall top-line guidance, we're more comfortable being at the higher end of the guidance that we had given at the start of the year. Having said that will obviously then, as a mix of that piece being a bit higher, impact the gross margin.
That's where I think Piyush guidance of closer to 59% as an overall mix would be about right on a higher end of the guidance on the top-line.
Got it. That's useful. Secondly, on the India business side, if you would break down growth into price, volume, new launches.
Yeah. I think if you look at it, the new launches would have been about 1%-2%. The rest of it is largely price and volume that we have.
Within that, how much would be volume?
I think price is about 5% for us, 4%-5%.
Got it. That's it from me, sir. Thank you.
Thank you. Our next question is from Ankush Mahajan. Please accept the prompt, unmute your audio, and proceed with your question.
Thanks for the opportunity. My question is related to the Poviztra. How is the response from the market? Because it's an innovative product when we compare it with the generic products. What kind of a market share we are building in this product now?
I mean, as I told some time back, we are getting traction month after month. Early days, as I told some time back, very recently approved for a MASH, we are also approaching hepatologist and gastroenterologist. Let's see how it plays out. Having said that, I think there is a lot of cacophony and a lot of noise, because so many brands are being marketed. Eventually, over a period of time, on the back of innovation, our DNA molecule, even for that matter, a lot of data is coming from the parent company. We should emerge as one of the bigger players over a period of time, and I see that traction month after month.
Thanks. My second one is related to the very strong growth in the rest of world business. What are the reasons behind it?
No, as far as the rest of the world is concerned, as we alluded some time back, as far as emerging markets are concerned, as far as the current quarter is concerned, it is driven by ARV, though if you look at the full year, there will be both ARV and the rest of the business should be 50/50. As far as the European market is concerned, that is also being driven by the differentiated technology-driven product that we are launching. Even for that matter, we are also getting traction because of the bolt-on acquisition that we did in U.K. in the form of Max. That is also adding to the business, because most of the products are now commercialized. Obviously, as far as Canada is concerned, we have a very strong base. Canada, again, what really happens, that we have a very strong product pipeline.
It's a well-rounded strategy that the company is following in terms of solid growth, then getting a lot of approvals, and that will continue to drive the business in these three geographies.
Thank you, sir. Thanks. That's from my side.
Ankush, may we have your company name as well, please?
Yeah. I am from the Sanctum Wealth.
Thank you. Our next question is from Foram Parekh. Please accept the prompt, unmute your audio, and proceed with your question after introducing yourself and your company name.
Yeah. Thank you for the opportunity. My name is Foram Parekh. I'm from BOB, Bank of Baroda, Capital Markets. My first question is on the net debt. In our opening remarks, we mentioned about net debt going up in the next quarter, while it has also gone up in this quarter. If you can talk about our strategy of debt repayment or by when can we expect to become net cash?
I'll answer your last question first. Probably by the end of FY 2028, we should be net cash. On the question on the debt going up, first I'll answer the one why it's going to go up in the next quarter. We have made these payments for acquisition of Mantra.
Also the Gennova minority stake. That will take up my debt by close to around INR 450 crores-INR 500 crores. On your question on why the debt went up from Q4 to Q1, yes, my working capital went up a little bit, but that's now stabilized in this month, that will come to normal thing in this quarter. By the end of next quarter, we should have a net debt of close to around INR 1,450 crores, from what today I see at INR 1,560 crores.
That's helpful. My second question is on our domestic organic growth, which was mentioned at 6%-8% growth. If you can give us some color, why is the organic growth growing at a slower pace, and how do we see organic growth pacing going forward? Will it come at par with the IPM?
Yeah. I don't know if you were able to capture. I think the CEO had answered that if you look at year-over-year quarter, part of that high, or let's say mid to high single digit growth for organic was impacted by some of the consolidation happening at Zuventus Healthcare level. I think as we look for the rest of the year, our guidance is that we'll be in line for the Q2, and in fact faster than industry growth, as we accelerate Zuventus Healthcare back to what we had seen off of a lower base of last year for the second half of this year. We're confident in terms of the overall guidance that even the organic business should be growing at par or faster than the industry growth when you look at the full year.
Sure, that's helpful. Thirdly, on the R&D side, we mentioned that R&D expense is also likely to go up. Some guidance, if you could share, what is the number that we should be working for FY 2027 of the contribution?
R&D, I think what we talked about for the full year will be between that 4%-5% range. I think we continue to maintain that out.
Sure. Lastly, is it possible for us to give the segmental constant currency growth for the international markets?
I don't think we break that out. Broadly, as I said, for the overall corporate level at about 6% Forex impact, international would have been about 12%-13%.
Sure. Thank you. That's all from my side, and all the best.
Thank you. The next question is from Alankar Garude. Please go ahead.
Hi. Thank you for the follow-up. This is Alankar from Kotak Institutional Equities. Sir, you were earlier planning to launch semaglutide in Quebec via your partnership with Reddy's in the second quarter, the current quarter. Post the issue faced by Dr. Reddy's, what are the revised timelines?
I think, Alankar, we'll defer to Reddy's on this, what's the timeline now. Whenever we have the product with us, we'll be able to launch it out. I think for timelines and all, probably Reddy's will be the right
Okay. No, just checking there, they have mentioned about a relaunch possibly in November. Earlier there was a lag between the launch in Quebec and the rest of Canada. Just checking whether that lag will be there at the time of the relaunch as well, or you'll be launching it in Quebec at the same time as Reddy's launches in Canada, rest of Canada?
I think it will depend on how the supplies from Reddy's shape up and how much supplies we can get.
Fair enough. Okay. The other question was, historically, if I look at the domestic market, there are some of these metrics like covered market and number of brands prescribed per doctor, where Emcure has been lower than most of your relevant peers. As you do more of licensing deals apart from new launches, how should we expect this to move as you progress on your five-year roadmap?
No, of course, as far as domestic is concerned, very close to our heart, we should be not only on par with the industry, we should do better than them. That is the strategy on which we are working, that's what I was telling some time back. Our domestic is concerned, there are three levers on which we'll be working. We'll try and make big clients bigger. We have some real jewels in the armory. The second thing, we'll obviously be working with multinationals and other in-licensing products. That is number two. As I told you some time back, more than 30%-35% of my sales are coming from the products which are developed by R&D. Whether you are talking about ferrous ascorbate, ferric carboxymaltose, or 11, 12 chiral compounds so that my company has given, or tenecteplase for both stroke and MI.
That journey will continue. Obviously, as I was telling you some time back, the process of consolidation phase is over. We are moving towards acceleration, you will see a lot of what I would say good news as far as the domestic market is concerned going forward. Personally, I'm very bullish about it.
Alankar, if I could just add. I think the whole rationale we've been highlighting for some of these in-licensing deals is these are, in some cases, very strong legacy brands that come with strong pen habits of the doctors. We believe that with the complementarity of Emcure's portfolio, we obviously want to leverage the co-prescriptions along with those writing habits. That is indeed the overall strategy, to see that the co-prescription should go up as we handle some of these in-licensing assignments, along with our portfolio that we continue to build.
That's quite helpful, Satish and Vik. That's it from my side. Thank you, and all the best.
Thank you. Ladies and gentlemen, if you wish to ask questions, you may please click on the Raise Hand tab or icon on your screen. As we have no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, gentlemen.
Thank you, [inaudible]. Thank you, everyone, for joining us today. In case you have any further questions or need any clarifications, please do get in touch with us. With this, we conclude the conference call. Have a wonderful rest of the day.
Thank you. On behalf of Emcure Pharmaceuticals Limited, that concludes this conference. Thank you all for joining us. You may now disconnect.